Your choices about lifestyle are a matter of life, death, and health.  The evidence shows that lifestyle decisions are a more important determinant of your health than which doctors and hospitals you visit and the services they provide to you.  Do you:

• Smoke
• Manage your weight
• Exercise
• Get the right amount of sleep
• Minimize stress
• Live happily

When you make good lifestyle decisions, you are healthier.  That translates into less use of the healthcare system and lower costs, both for you and whoever may be paying for healthcare on your behalf (e.g., employer, union, government).

Tying Financial Incentives To Lifestyle Decisions

Your level of health, and the cost of your healthcare, can be impacted both by good decision-making and by good luck.  Though we cannot do much to impact our luck, we have control over our personal decision-making and lifestyle.  Therefore, we would argue that people who make good personal decisions about their health should also derive certain financial benefits.

How do we do this?  By giving people ‘skin in the game’.  By emphasizing the importance of personal responsibility.  And by rewarding success for living a healthy lifestyle.  These are the essential elements of the Consumer Driven Health Care movement.  It’s worth learning more about this concept because I believe it is the key to maintaining a private health care system in the United States (and preserving the delivery of the best healthcare services in the world).

How One Large Corporate (Safeway) Does It

Supermarket chain Safeway is held up by President Obama and others as a model for controlling healthcare costs through prevention and wellness.  Safeway uses a consumer driven model of health insurance for their employees, in this case a Health Reimbursement Account (HRA).  A major contributor to their success in controlling healthcare costs has been a system of financial rewards for employees who make good lifestyle decisions.

Safeway’s approach is to establish premium differentials for employees based on certain healthy lifestyle measures, including tobacco usage, healthy weight, blood pressure, and cholesterol levels.  The results of these tests are used to establish premium “rewards.”   Safeway employees who pass all four tests have their annual premiums reduced by $780 ($1,560 for families).  Since the idea is to help employees succeed and save money, individuals who fail one or more tests can be tested again in 12 months.  The program has been a ‘win-win’ for Safeway and its employees.

What Can Your Company Do?

Much depends on your company’s size and resources, but it all starts with a commitment to prevention and wellness.  Engage a Wellness Coach to develop a plan for your company.  You can start with educational seminars and a newsletter, health fairs, discounts for the gym memberships, testing of body fat and cholesterol levels, and so forth.

Once you’ve establish the basic programming, we can begin to think about tying financial incentives to employee decision-making and behavior.  Contact us.  Our Wellness Coach can visit with you and make recommendations.  It works and it saves money.

Governor Daniels’ Mission

Mitch Daniels, a former Director of the U.S Office of Management and Budget (OMB), assumed the Indiana governorship in January of 2005. Gov. Daniels knew that he would have to immediately begin to address the State’s annual $600 million budget deficit if he was succeed in his mission to improve quality of life in the Hoosier state. Indiana has over 30,000 state employees, and one of Daniels’ early decisions was to offer an HSA option to these workers.

The HSA Model for Indiana

The principle behind the HSA concept is that individuals spend their own money for routine expenses, and they are “insured” above some pre-determined, high deductible level. If they incur high expense due to a serious illness or injury, they have full insurance coverage above the deductible. But otherwise, they are spending their own money and they are therefore more likely to be concerned about the cost and value of the services they are receiving. For those Indiana workers choosing the HSA, it works as follows:

• Employees have a choice between a traditional PPO model and an HSA.
• Depending on whether the employee chooses single or family coverage, the state will deposit money into an account controlled by the employee, used to pay for all health bills (average deposit in Indiana is $2750 per employee per year).
• After the deductible, the state and employee share costs up to an out-of-pocket maximum, after which the employee has 100% coverage.
• Employees pay a share of their premium for PPO coverage but there is NO PREMIUM paid by the state worker for their HSA coverage.

In the first year of the program, 4% of Indiana workers signed up for the HSA, and there has been a steady growth in participation since.

Financial Results

Today, over 70% of Indiana workers participate in the HSA and the financial impact has been impressive:

• In 2010, Indiana will save at least $20 million in its state budget from this program.
• Workers choosing the HSA option save an additional $8 million compared to workers in the traditional PPO plan.
• The average balance in the HSA bank accounts is $2000 and growing rapidly, thereby adding to a worker’s take home pay.
• HSA participants spend an average of only $65 in medical costs for every $100 incurred by traditional PPO plan participants (e.g., for prescription drugs, costs are $18 lower per script).

The success of Indiana’s health benefits program is a model for other states as well as for private sector employers—it is a ‘win-win’ for both the employer and their employees.

Impact on Employee Satisfaction and Consumer Behavior

More good news!! As the enrollment in the HSA model has steadily grown, the participants seem highly satisfied—only 3% have chosen to switch back to the traditional plan. The state reports that workers are visiting emergency rooms and physicians 67% less frequently than co-workers with traditional health care, and they are admitted to hospitals half as frequently. Most importantly, there is no apparent evidence identified by the state or its consultants that HSA participants are neglecting to receive needed healthcare services in order to save money. Indiana employees are satisfied; they are receiving good health care and it is costing less.

Implications For Business

At RMP, we’ve been setting up programs like the one in Indiana longer that any other health insurance advisor in the area. My article, called HSAs Work, Here’s Why was published in the Philadelphia Business Journal in 2006. RMP client case studies, particularly from those who have been with us for a few years, can attest to this fact. The concluding words from Governor Daniels best sum up this story:

The prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else’s credit card…. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan’s immense savings.

Our conclusion—it IS possible to get equal or better healthcare for less money. If you are buying health benefits for your employees, or otherwise purchasing healthcare services, you can most likely do better. Call us at 610-975-4415 if we can help.